澳洲Australia property Renting out my home - Then renting anothe


在澳大利亚 The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m


This may seem like a strange thing to do but my wife and I are considering it.

We would like to rent our current home (the only property we own) and then rent in an suburb which we cannot currently afford to buy. The reason we would like to do this is because we plan on eventually buying in this suburb and our first child is nearly 3 so we would like to get settled there before she starts school. This way we don't have to move her half way through.

I have read that CGT only applies after 6 years of renting out the home, so I assume if within this period we can afford a house in the suburb we want to live in we can then sell our home without paying any CGT.

Has anyone else done this or maybe currently doing this?

Are there any other tax implications? Will I need to pay tax if the rent is more than the interest? (Not that I think this will be the case) The different between the rent of our home and the home in the new suburb will be $50-$100 per week more.

We are currently putting an extra $600 per month into our mortgage and our original plan of this thinking was doing this until our daughter is 4 (end of next year) and then buying or renting in then new suburb depending on our financial situation. Obviously this would be better but we would be so much more happier in the new suburb. And isn't that whats more important.

Any help or comments would be grateful.

-Kriso  

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kriso said: ↑
I have read that CGT only applies after 6 years of renting out the home, so I assume if within this period we can afford a house in the suburb we want to live in we can then sell our home without paying any CGT.Click to expand...
NOT entirely true. For it to be CGT free, it needs to be your PPOR (i.e. you don't have another PPOR - which it sounds like you won't) and you need to move back into it before the expiry of 6 years for a period.

kriso said: ↑
Has anyone else done this or maybe currently doing this?Click to expand...
Yes, people do this a lot.

kriso said: ↑
Are there any other tax implications? Will I need to pay tax if the rent is more than the interest? (Not that I think this will be the case)Click to expand...
Yes you will need to pay tax on rental income less expenses (if that is a +ve number). Bear in mind that in 5 years rents will be more expensive but interest may be the same as now. So you may end up paying tax at some point. Also get a depreciations schedule done.

kriso said: ↑
We are currently putting an extra $600 per month into our mortgageClick to expand...
STOP doing that immediately. Only the interest on the loan is tax deductible when you turn it into an IP. Better to put it into an offset account.  

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Propertunity said: ↑
STOP doing that immediately. Only the interest on the loan is tax deductible when you turn it into an IP. Better to put it into an offset account.Click to expand...
+1 to what Propertunity said. Try to get a 100% offset account and maybe consider changing your loan to interest-only rather than principal and interest, seeing it will be an investment property in the future. This is assuming you are disciplined with money and will keep putting money in the offset at the same rate as you've been putting it in the mortgage, of course.  

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Propertunity said: ↑
NOT entirely true. For it to be CGT free, it needs to be your PPOR (i.e. you don't have another PPOR - which it sounds like you won't) and you need to move back into it before the expiry of 6 years for a period.Click to expand...
Just to clarify, if I may...

The CGT exemption will last for six years after moving out of the PPOR, even if it generates income. If you sell within that time, and don't apply the exemption to another home for that same period, then the sale will be CGT-free and covered by the main residence exemption. This is regardless of whether you move back in, or not.

You would only need to move back into the property and make it your home, if you wanted to reset the main residence exemption for another six years.

For those who might be interested, the tax office have a tool on their website which helps to work out potential eligibility for the main residence exemption. You can find it, here.  

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JamesGG said: ↑
This is regardless of whether you move back in, or not.Click to expand...
I stand corrected.:eek:

JamesGG said: ↑
You would only need to move back into the property and make it your home, if you wanted to reset the main residence exemption for another six years.Click to expand...
That must have been what I was thinking of. Cheers, James.  

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Yep, I'm doing this at the moment. Our reason is for cashflow purposes. Rental yields for houses are terrible round here and is much cheaper to rent than buy - if we had a mortgage on this place we'd be paying out an additional $250 per week excluding rates etc. If interest rates remain the same for a while we're thinking of buying another IP than buying a house in this suburb, using the "savings" above. I guess there's a risk of the owner selling up or wanting us out but willing to take that chance for the time being.  

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